Special Discussion: "2019 Advertising Expenditures in Japan" What is necessary for the growth of mass media advertising now?

"2019 Japan Advertising Expenditure" achieved positive growth for the eighth consecutive year, with internet advertising expenditure, which continues to show sustained growth, driving overall advertising expenditure.

Mr. Ritsuya Oku of Dentsu Media Innovation Lab interviewed Mr. Makoto Koide, Managing Director of the Japan Advertisers Association, about his views on mass media, the potential of digital advertising originating from the four major media outlets, and the future outlook for television.

<Table of Contents>
▼A "Media-Neutral" Perspective, Unbound by Traditional Media Frameworks, is Necessary
▼ Expectations for the Expansion of "Digital Advertising Originating from the Four Mass Media"
▼Television Should Be Measured by "Number of People" Rather Than "Percentage"
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Mr. Makoto Koide, Managing Director, Japan Advertisers Association (left), and Mr. Ritsuya Oku, Dentsu Inc. Media Innovation Lab

A "media-neutral" perspective, unconstrained by specific platforms, is essential

Oku: Japan's total advertising expenditure in 2019 reached ¥6.9381 trillion, marking the eighth consecutive year of growth since 2012. Internet advertising spending achieved double-digit growth for the sixth straight year, finally surpassing television advertising expenditure.

Koide: I had anticipated internet advertising spending surpassing television, so it wasn't a major surprise. However, what we advertisers should carefully consider here is not getting overly fixated on the advertising statistics showing which medium overtook the other.

What matters is consistently returning to a "media-neutral" perspective: utilizing the most suitable media to effectively promote products and services. Sometimes internet advertising is optimal, while other times TV commercials or newspaper inserts deliver the greatest impact.

Oku: Each medium has its own role, right? As Mr. Koide mentioned, it's crucial to skillfully utilize television, radio, newspapers, magazines, and the internet from a media-neutral standpoint.

Koide: For advertisers to find the optimal solution—which media to use and how—they need deep expertise in each medium. For example, without understanding the strengths and weaknesses of digital advertising, its risks, and how it should be used, they can't compare it to other media and make informed choices. Planning from a media-neutral perspective is actually still quite challenging for advertisers.

Furthermore, I suspect that many media managers within advertising agencies are currently in a siloed state, possessing only knowledge and information about their assigned media. It's vital for TV, radio, newspaper, and magazine managers to gain proper knowledge about digital advertising, and digital managers must also understand other media. It's not simple, but I feel that advertisers going forward will need the ability to think cross-media, without separating mass media and digital.

Expectations for Growth in "Digital Advertising Originating from the Four Mass Media"

Oku: While internet advertising spending significantly exceeded the previous year's figures, advertising spending across the four mass media outlets (TV, radio, newspapers, magazines) fell below the previous year's levels.

Koide: I suspect this decline in the four major media's advertising revenue is due to the shift to internet advertising, which has captured massive advertising income. While there are several reasons, one factor might be the difference in speed between when an advertiser places an order and when the ad is actually exposed to the public.

Oku: With internet advertising, the PDCA cycle is fast, and the time from receiving an ad request to launching it is short, right?

Koide: For example, with TV commercials, deadlines like "by when to place the order" and "by when to submit the ad materials" were set quite far in advance. However, recently, TV has also updated to a more flexible approach. From the advertiser's perspective, it's becoming easier to use. I believe changing this stance is necessary to prevent a reduction in advertising spending on the four major media outlets.

But the most crucial thing is to further focus on and grow "digital advertising originating from the four major media outlets" (*), which continued to see growth in 2019. Over the past decade, while advertising spending on the four major media outlets has decreased by hundreds of billions of yen, internet advertising spending has increased by hundreds of billions of yen. There is inherent potential for the four major media outlets to cover this gap by shifting to digital.

※ Digital advertising originating from the four major media outlets
Advertising spending on internet media services primarily provided by mass media companies

Oku: That's right. However, digital advertising spending originating from the four major media outlets remains at only about 70 billion yen overall.

Koide: To grow this segment, each media outlet needs to leverage its unique strengths. For example, current internet advertising faces issues like ad fraud—where impressions and clicks are inflated—and brand risks from appearing alongside inappropriate content or fake ads. In response, newspaper digital advertising should emphasize providing secure ad space built on the foundation of "the trust inherent in the newspaper medium." Magazines, meanwhile, possess long-cultivated expertise in content creation, enabling them to develop digital media leveraging that know-how.

Oku: Among the four major media outlets, digital advertising spending for magazines has reached the highest total amount, driven by the significant growth in the e-publishing market. There still seems to be considerable room to leverage the strengths of mass media within the digital domain.

Koide: For example, some magazine publishers now see digital advertising revenue outpacing print advertising revenue within their advertising departments. Another medium I want to highlight is radio. Looking at data from 2010 to 2019, while advertising spending across the four major media outlets declined significantly, radio actually only saw a drop of about 3%.

Oku: Radio has been the fastest among the four major media to push forward with digital transformation. radiko.jp, which allows listening via the internet, has been around for ten years now.

Koide: While radio is a mass medium, it created a system through digitalization that allows data collection 365 days a year. It enables time-shifted listening, and although it's not widely utilized yet, it also allows for targeting. I believe it's leading the way in defining a new form of mass media.

Oku: Television entered the digital arena later than radio, but services like TVer and AbemaTV are gaining traction.

Koide: Precisely because TV entered the digital space later, I believe its potential is the greatest. Ultimately, mass media needs to secure personnel and funds to invest in new areas, even if it's just 10% annually.

Another crucial point is that digital must be considered on an annual basis, or even shorter cycles. The nature of digital is that platforms and popular apps change rapidly every year, so organizations need to adapt to this pace.

I hope television can be measured in "people" rather than "percentages."

Oku: In these times demanding change, what expectations do you have for television?

Koide: Television boasts an overwhelming number of viewers. To clearly communicate this massive scale to the public, television should emphasize not just the percentage-based "viewership ratings," but also the actual scale based on concrete numbers like "viewer count and frequency."

For example, airing a TV commercial with a national household rating of 1000 GRP (※1) is equivalent to approximately 600 million views for a 15-second video ad. Assuming a cost-per-view of 1 yen for internet video ads, achieving 600 million views would require a whopping 600 million yen in advertising costs.

Even for a TV program with a 6% rating, given Japan's total of over 50 million households, commercials aired during the program reach approximately 3 million viewers. That's an impressive figure, right?

※1 GRP: Gross Rating Point (Total Viewership)
The total rating points earned by a TV commercial aired over a set period. For example, airing a TV commercial three times during a program with a 1% rating yields 3 GRP.

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Oku: Rather than focusing on the percentage represented by the rating, thinking about "how many people are actually seeing the ad?" makes it easier to grasp the sheer volume of television advertising, doesn't it?

Koide: Understanding it in terms of actual people connects previously separate entities like "TV and the internet" or "terrestrial and satellite broadcasts," allowing us to "add them together." This makes it easier to understand when creating media plans or communicating the scale of initiatives to distribution channels.

Additionally, from an advertiser's perspective, I'd like to request more diverse programming that targets specific viewer segments. Create shows tailored to what each generation, gender, and distinct segment wants—programs young women enjoy, shows older men prefer, and so on. Having clearly defined, focused programming allows for efficient ad exposure to the target audience.

Television has moved beyond household ratings into the era of individual ratings. Depending on the advertising product, the programs advertisers seek are no longer those with a broad, evenly distributed audience across all age groups. Consequently, advertiser requests no longer concentrate on specific programs or time slots; they spread out across various program slots.

Furthermore, if the aforementioned viewer numbers were publicly disclosed, it would make calculating target CPM easier. It would also simplify efficiency comparisons with targeted digital advertising, opening up new opportunities.

※CPM: Cost Per Mille (cost per 1,000 impressions)
The amount required to reach 1,000 target households (people) with an advertisement.

Oku: TV programs include both national and local ones. Are there unique advantages to running ads on local station programs?

Koide: Local TV stations probably aren't fully aware of how affordable their CPM rates are within their own areas. When calculated based on total population, CPM rates in regional areas are significantly cheaper than in the Kanto region. There are many local areas where you can achieve 1000 GRPs at a very reasonable cost.

Therefore, more companies seem to be adopting a strategy where they first test-market commercials in low-CPM local areas. If the results meet expectations, they then roll out the same material nationally. This approach of starting in regional markets and gradually expanding into densely populated areas is quite interesting.

Oku: In a way, it's similar to A/B testing in internet advertising, but it's fascinating as a TV advertising approach. With viewer count tracking, diverse programming tailored to specific demographics, and local-first commercial broadcasts, there still seems to be plenty of room for TV alone to innovate and evolve to suit the current era. Thank you for your valuable insights today.